Patrick Goldstein and James Raineyon entertainment and media

Is Hollywood settling into a prolonged recession of its own?

August 23, 2010 | 6:00
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No one needs any introduction to America's prolonged recession, which has put millions of people out of work and set the country on edge, creating an unprecedented level of angst, anger and political unrest. But even though this year's box office grosses are up a little over a year ago -- due mainly to higher ticket prices and 3-D -- Hollywood remains in the grip of a serious recession of its own.

Being Hollywood, it's a different kind of recession, since to the outside world, things seem to be humming along smoothly, with scrums of new films invading the multiplexes each weekend, stars touting their latest wares on TV everywhere and Oscar campaigning already beginning to gear up nearly six months before the awards unfold. But ask anyone inside the business, from agents and managers to writers and producers, and they'll give you an earful of unhappy news. "The Expendables" may have given Sly Stallone and his aging posse of action stars a new lease on life, but jobs are just as scarce in show business as everywhere else.

To hear people talk, this summer the industry may have hit the bottom of the market. That is, unless things get even worse. First off, there are fewer buyers than ever before. Most of the specialty divisions have been shuttered, New Line has been absorbed into Warners, MGM is in suspended animation and of the six remaining major studios, at least two -- Universal and Sony -- have spent all of their development money for the year, putting a big crimp in the marketplace. (The studios in question say they are still developing projects if the right one comes along, but according to every agent and manager I spoke to, the packages are awfully few and far between.)

Disney, whose new management seems determined to turn it into Procter & Gamble, is making fewer movies than ever before. The studio has zero interest in the kind of edgy or compelling material than would attract the David Finchers or Brad Pitts of the world. In fact, the studio recently told agencies that it had three types of "buckets" (Disney-ese for movie genres) that it wanted to focus on: tentpoles, comedies with heart and inspirational movies. How exactly that differs from the kind of movies that Disney has been making from time immemorial is beyond me, but it certainly speaks to how narrow the studio's aspirations are these days.

Warners and 20th Century Fox continue to make a lot of movies, as does Paramount, although Paramount seems more interested in distributing films than financing them, leading many insiders to believe that the studio is angling to make a deal to distribute MGM product when and if the studio comes back to life. But there is far less big Wall Street money coming into the business to bolster the studio's film slates, which has translated into far fewer movies being made this year than in years past. The result? Far fewer people are working than ever and the ones who are getting jobs are making considerably less than they were in the past.

Wherever you look, there is consolidation and financial stress as people have been forced to adjust to a Darwinian thinning of the herd. "You'd have to say that this summer we probably hit bottom, certainly creatively, with so many studios relying on so much pre-sold branded product," said one top agent. "It's really hard, because so much money has left the business, there are fewer distributors than ever before and many of the ones that are left have cash problems, so it's just agonizingly difficult to get a movie up and running right now."

Even worse, the kind of movie a studio will finance right now has narrowed considerably. Studios will spend fortunes on their big tentpole or franchise movies, because those are the movies that move the needle, both in terms of making the best use of studio marketing dollars and attracting audiences around the globe, which is where the biggest profits are these days. When it comes to the kind of films that talent want to make -- ones with slightly loftier aspirations -- the studios will only play ball on their terms and on their schedule, forcing everyone involved to work for what in Hollywood passes for peanuts.

On the other hand, Hollywood is full of salesman and hustlers, who are, by nature, born optimists. So it isn't hard to find a few people who offer some glimmers of hope. After all, Spyglass is coming in to run MGM, so it seems likely that it will have to put money into the marketplace to rebuild the ruined old lion of a studio. DreamWorks is finally starting to make movies again. Ryan Kavanaugh's Relativity is looking more and more like a full-scale studio operation. And maybe when Comcast starts to clean house, Universal's woes will be over.

You could actually make the case that it's an especially good time to invest in the movie business. With studio releases down perhaps as much as 25%, films can play longer with less competition for the moviegoing dollar. (And with fewer studios to advertise, ad rates could dip as well.) Physical distribution costs are going down as well, thanks to the arrival of digital distribution. And best of all, at least to an investor, talent costs are way down, with only a precious few stars getting first-dollar gross, so a new investor could get to profit faster than ever, even if they are making a star vehicle.

But for now, the legions of outside investors who used to show up in Hollywood, magnetized by the glamor of the business, have slowed to a trickle. The big spenders have been scared away by all of the financial carnage that has shuttered the smaller distributors and sent investors fleeing. So it's easy to find a lot more bears than bulls in the Hollywood marketplace. For the people who make showbiz hum, from the carpenters and the craftsfolk to the screenwriters and the stars, times are tough. Turns out the movie industry isn't a recession-proof business after all.

Photo: Sylvester Stallone and Terry Crews from "The Expendables" ring the opening bell at the New York Stock Exchange. Credit: Seth Wenig / Associated Press